Retailing 8th Edition by Patrick M. Dunne – Test Bank

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CHAPTER 5—MANAGING THE SUPPLY CHAIN

 

MULTIPLE CHOICE

 

  1. A _____ is defined as a set of institutions that moves goods from the point of production to the point of consumption.
a. retail system
b. transporter
c. supply chain
d. franchisee
e. value chain

 

 

ANS:  C                    PTS:   1                    REF:   p. 184-185      OBJ:   LO 5-1

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Knowledge

 

  1. Concerning the “supply chain,” which of the following statements is true?
a. Supply chains are so closely associated with high prices that many retailers are dropping out of supply chains and performing the functions themselves.
b. Most supply chains will disappear within the next decade, as all merchandise will soon be purchased directly from manufacturers.
c. Supply chains do not aid the retailer in providing possession, form, or place utility, for the final consumer.
d. Profits sufficient for survival and growth will be difficult for a retailer to achieve without being part of an efficient, effective supply chain.
e. Supply chains seldom change over time.

 

 

ANS:  D                    PTS:   1                    REF:   p. 185-186      OBJ:   LO 5-1

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Comprehension

 

  1. The supply chain, or channel, is affected by five external forces: consumer behavior, the legal and ethical environment, the socioeconomic environment, the technological environment, and:
a. the natural or physical environment.
b. competitive behavior.
c. personal relationships.
d. channel function management.
e. new government regulations.

 

 

ANS:  B                    PTS:   1                    REF:   p. 186             OBJ:   LO 5-1

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Knowledge

 

  1. Which of the following external forces does NOT have a major influence on the supply chain?
a. Technological environment
b. Employee morale
c. Legal environment
d. Consumers
e. Behavior of competitors

 

 

ANS:  B                    PTS:   1                    REF:   p. 186             OBJ:   LO 5-1

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Comprehension

 

  1. The eight marketing functions are buying, selling, storing, transporting, information gathering, financing, risk taking, and:
a. managing.
b. product development.
c. facilitating.
d. designing.
e. sorting.

 

 

ANS:  E                    PTS:   1                    REF:   p. 187             OBJ:   LO 5-1

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Knowledge

 

  1. Each of the following is a marketing function that retailers perform EXCEPT:
a. pricing.
b. information gathering.
c. selling.
d. financing.
e. storing.

 

 

ANS:  A                    PTS:   1                    REF:   p. 187             OBJ:   LO 5-1

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Comprehension

 

  1. _____ involves breaking down heterogeneous materials or product into more homogenous groups.
a. Organizing
b. Classifying
c. Synthesizing
d. Sorting
e. Grouping

 

 

ANS:  D                    PTS:   1                    REF:   p. 187             OBJ:   LO 5-1

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Knowledge

 

  1. Marketing institutions are classified into two categories:
a. those that take title to the goods and those that do not.
b. those that are paid a flat fee and those that work on commission.
c. those that take possession and those that do not.
d. those that are profitable and those that are not.
e. those with high margin and those with low margin.

 

 

ANS:  A                    PTS:   1                    REF:   p. 190             OBJ:   LO 5-1

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Comprehension

 

  1. The major difference between primary marketing institutions and facilitating marketing institutions is that facilitating members:
a. do not take title to the goods.
b. are paid only a percentage of profits made.
c. take title to the goods.
d. perform all eight functions in all channels situations.
e. are always paid by the manufacturer.

 

 

ANS:  A                    PTS:   1                    REF:   p. 190             OBJ:   LO 5-1

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Comprehension

 

  1. There are three types of primary marketing institutions: manufacturers, retailers and:
a. transporters.
b. agents/brokers.
c. wholesalers.
d. advertisers.
e. warehouses.

 

 

ANS:  C                    PTS:   1                    REF:   p. 190             OBJ:   LO 5-1

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Knowledge

 

  1. Which one of the following institutions involved in a supply chain would take title to the goods it is dealing with?
a. Trucking company
b. Insurance company
c. Market researcher
d. Retailer
e. Public warehouse

 

 

ANS:  D                    PTS:   1                    REF:   p. 191             OBJ:   LO 5-1

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Application

 

  1. Facilitating institutions may best be described as specialists that:
a. while not taking title, still perform marketing functions for supply chain members.
b. create new markets for the manufacturer.
c. serve as the supply chain leaders.
d. perform functions supply chain members cannot legally perform.
e. eliminate conflict from the supply chain.

 

 

ANS:  A                    PTS:   1                    REF:   p. 192             OBJ:   LO 5-1

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Comprehension

 

  1. The major facilitating institution involved in storage is the:
a. private warehouse.
b. in-transit warehouse.
c. demand collection channel.
d. contract warehouse.
e. public warehouse.

 

 

ANS:  E                    PTS:   1                    REF:   p. 194             OBJ:   LO 5-1

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Knowledge

 

  1. Retailers frequently use _____ for short-term loans to fund working-capital requirements.
a. commercial banks
b. factors
c. e-tailing brokers
d. stock and commodity exchanges
e. venture-capital firms

 

 

ANS:  B                    PTS:   1                    REF:   p. 195             OBJ:   LO 5-1

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Comprehension

 

  1. _____ are primarily used by retailers starting a new operation or format.
a. Factors
b. Merchant banks
c. Stock and commodity exchanges
d. Venture-capital firms
e. Insurance firms

 

 

ANS:  D                    PTS:   1                    REF:   p. 195             OBJ:   LO 5-1

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Knowledge

 

  1. There are actually three strategy decisions to be made when designing an efficient and competitive supply chain: supply chain length, width, and:
a. convenience.
b. depth.
c. organization.
d. type.
e. control.

 

 

ANS:  E                    PTS:   1                    REF:   p. 195             OBJ:   LO 5-2

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Knowledge

 

  1. A(n) ______occurs when the manufacturers sell their goods directly to the final consumer.
a. supply chain width
b. selective distribution channel
c. direct supply chain
d. exclusive distribution channel
e. indirect supply chain

 

 

ANS:  C                    PTS:   1                    REF:   p. 195             OBJ:   LO 5-2

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Knowledge

 

  1. A(n) _____ supply chain is the channel that results once independent channel members are added between the manufacturer and the consumer.
a. direct
b. indirect
c. localized
d. undiverted
e. limited

 

 

ANS:  B                    PTS:   1                    REF:   p. 196             OBJ:   LO 5-2

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Comprehension

 

  1. When all possible retailers are used in a trading area, the channel strategy is termed:
a. exclusive.
b. intensive.
c. selective.
d. partial coverage.
e. pull coverage.

 

 

ANS:  B                    PTS:   1                    REF:   p. 197             OBJ:   LO 5-2

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Knowledge

 

  1. Selective distribution:
a. means that all possible retailers are used to reach the target market.
b. means only one retailer is used in the trading area.
c. means that a smaller number of retailers are used to reach the target market.
d. is associated with the distribution of convenience goods.
e. is identified with specialty goods.

 

 

ANS:  C                    PTS:   1                    REF:   p. 197             OBJ:   LO 5-2

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Knowledge

 

  1. Exclusive distribution:
a. means only one retailer is used in the trading area.
b. means that a smaller number of retailers are used to reach the target market.
c. means that all possible retailers are used to reach the target market.
d. is associated with the distribution of convenience goods.
e. is associated with shopping goods.

 

 

ANS:  A                    PTS:   1                    REF:   p. 197             OBJ:   LO 5-2

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Knowledge

 

  1. Although there are exceptions, as a general rule _____ distribution is associated with _____ goods.
a. intensive; shopping
b. intensive; convenience
c. selective; specialty
d. selective; luxury
e. selective; convenience

 

 

ANS:  B                    PTS:   1                    REF:   p. 197             OBJ:   LO 5-2

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Comprehension

 

  1. Although there are exceptions, as a general rule _____ distribution is associated with _____ goods.
a. intensive; shopping
b. intensive; specialty
c. selective; specialty
d. selective; shopping
e. selective; convenience

 

 

ANS:  D                    PTS:   1                    REF:   p. 197             OBJ:   LO 5-2

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Comprehension

 

  1. Although there are exceptions, as a general rule _____ distribution is associated with _____ goods.
a. intensive; shopping
b. selective; convenience
c. selective; specialty
d. exclusive; shopping
e. exclusive; specialty

 

 

ANS:  E                    PTS:   1                    REF:   p. 197             OBJ:   LO 5-2

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Comprehension

 

  1. Items for which are frequently purchased and the consumer is not willing to spend a great deal of effort to purchase are known as:
a. shopping goods.
b. industrial goods.
c. convenience goods.
d. raw materials.
e. specialty goods.

 

 

ANS:  C                    PTS:   1                    REF:   p. 197             OBJ:   LO 5-2

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Knowledge

 

  1. Usually high-prestige branded products that the consumer expressly seeks out, such as Rolex watches, are known as:
a. shopping goods.
b. industrial goods.
c. convenience goods.
d. raw materials.
e. specialty goods.

 

 

ANS:  E                    PTS:   1                    REF:   p. 197             OBJ:   LO 5-2

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Knowledge

 

  1. A supply chain in which each member is loosely aligned with the others is a(n):
a. modified channel.
b. unadministered channel.
c. conventional marketing channel.
d. corporate marketing channel.
e. contractual marketing channel.

 

 

ANS:  C                    PTS:   1                    REF:   p. 198             OBJ:   LO 5-2

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Comprehension

 

  1. Identify the incorrect statement about the conventional marketing channel.
a. It is historically predominant in the United States.
b. It is a sloppy and inefficient method of conducting business.
c. It fosters intense negotiations within each pair of institutions in the supply chain.
d. Its members are able to divide the marketing functions among all the participants.
e. It has been on the decline in the United States since the early 1950s.

 

 

ANS:  D                    PTS:   1                    REF:   p. 198             OBJ:   LO 5-2

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Comprehension

 

  1. Vertical marketing channels attempt to:
a. increase channel effectiveness but not channel efficiency.
b. minimize the suboptimization of the channel.
c. increase channel efficiency while minimizing channel effectiveness.
d. maximize the suboptimization of the channel.
e. coordinate activities among retailers.

 

 

ANS:  B                    PTS:   1                    REF:   p. 199             OBJ:   LO 5-2

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Comprehension

 

  1. Identify the correct statement about quick response (QR) systems.
a. They are developed by conventional channel members.
b. They are also known as SKU systems.
c. These systems are different despite the similar names adopted by various retail industries.
d. They are designed to obtain real-time information on consumers’ actions by capturing ECR data at point-of-purchase terminals.
e. The information obtained is used to develop new or modified products, manage channel-wide inventory levels, and lower total channel costs.

 

 

ANS:  E                    PTS:   1                    REF:   p. 199             OBJ:   LO 5-2

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Application

 

  1. Vertical marketing channels are typically classified into the following three categories:
a. contractual, administered, and corporate.
b. cooperatives, owned, and voluntary.
c. wholesaler-sponsored, retailer-sponsored, and franchised.
d. vertical, horizontal, and interfaced.
e. facilitating, primary, and conventional.

 

 

ANS:  A                    PTS:   1                    REF:   p. 199             OBJ:   LO 5-2

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Knowledge

 

  1. What type of vertical marketing channel has a well established authority structure?
a. Franchise system
b. Contractual vertical marketing system
c. Conventional marketing system
d. Corporate vertical marketing systems
e. Wholesaler-sponsored voluntary group

 

 

ANS:  D                    PTS:   1                    REF:   p. 199             OBJ:   LO 5-2

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Comprehension

 

  1. An attempt by a wholesaler to preserve a market for its products by strengthening the retailers that it sells to is an example of what type of channel arrangement?
a. Retailer-owned cooperative
b. Wholesaler-sponsored voluntary group
c. Corporate system
d. Retail-sponsored marketing system
e. Franchised retail program

 

 

ANS:  B                    PTS:   1                    REF:   p. 200             OBJ:   LO 5-2

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Application

 

  1. TrueValue, Ace, and Handy Hardware are all examples of a(n):
a. retailer-owned cooperative.
b. contractual vertical marketing system.
c. wholesaler-sponsored voluntary group.
d. independent retailer.
e. franchisee.

 

 

ANS:  A                    PTS:   1                    REF:   p. 201             OBJ:   LO 5-2

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Knowledge

 

  1. A(n) _____ is a type of contractual vertical marketing channel that is actually a form of licensing.
a. retailer-owned cooperative
b. conventional marketing channel
c. franchise
d. wholesaler-sponsored voluntary group
e. independent retailer

 

 

ANS:  C                    PTS:   1                    REF:   p. 202             OBJ:   LO 5-2

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Comprehension

 

  1. Sylvan Learning, The UPS Store, AAMCO Transmissions, H&R Block, and Lawn Doctor are examples of what kind of vertical marketing channel?
a. Wholesaler-sponsored voluntary group
b. Contractual channel system
c. Administered system
d. Retailer-owned cooperative
e. Conventional marketing system

 

 

ANS:  B                    PTS:   1                    REF:   p. 202-203      OBJ:   LO 5-2

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Analysis

 

  1. A(n)_______ vertical marketing channel exists when one of the members takes the initiative to manage the channel.
a. administered
b. allocated
c. conventional
d. concentrated
e. concentric

 

 

ANS:  A                    PTS:   1                    REF:   p. 204             OBJ:   LO 5-2

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Comprehension

 

  1. The three concepts of interorganizational management that a retail executive needs to understand are dependency, _____, and conflict.
a. trouble-shooting
b. interorganizational transfers
c. power
d. chain of command
e. personalities

 

 

ANS:  C                    PTS:   1                    REF:   p. 206             OBJ:   LO 5-3

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Knowledge

 

  1. Sun Fashions offered to display Shark Sportswear’s new line of swimwear at the entrance of its store if Shark pays 50 percent of the advertising expenses for Sun Fashions’ Spring/Summer Catalog. Sun Fashions is employing which type of power?
a. Reward power
b. Traffic power
c. Referent power
d. Legitimate power
e. Expertise power

 

 

ANS:  A                    PTS:   1                    REF:   p. 207             OBJ:   LO 5-3

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Application

 

  1. Manufacturers usually listen to a retailer’s statements about the introduction of new products because retailers are often more knowledgeable about how their consumers will react. Manufacturers understand that retailers possess what type of power in this example?
a. Legitimate
b. Expertise
c. Knowledge-based
d. Reward
e. Referent

 

 

ANS:  B                    PTS:   1                    REF:   p. 207             OBJ:   LO 5-3

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Comprehension

 

  1. _____ is power derived from one channel member’s desire to identify with their channel partner.
a. Reward power
b. Expertise power
c. Legitimate power
d. Referent power
e. Coercive power

 

 

ANS:  D                    PTS:   1                    REF:   p. 207             OBJ:   LO 5-3

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Comprehension

 

  1. An example of coercive power is a manufacturer’s:
a. refusal to sell merchandise to any retailer who sells to diverters.
b. offer to increase the cash discounts if the retailer meets a sales quota.
c. offer a co-op promotional plan to all retailers in a key city.
d. payment for a prominent display area in a retailer’s store.
e. act of sending the retailer a Christmas card without a year-end bonus.

 

 

ANS:  A                    PTS:   1                    REF:   p. 207             OBJ:   LO 5-3

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Application

 

  1. The presence of legitimate power is most easily seen in:
a. retailed-owned cooperatives.
b. franchises.
c. administered vertical marketing channels.
d. dependency.
e. contractual marketing channels.

 

 

ANS:  E                    PTS:   1                    REF:   p. 207             OBJ:   LO 5-3

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Comprehension

 

  1. The three main sources of conflict between retailers and their suppliers are:
a. power, control, and interdependency.
b. perceptual incongruity, goal incompatibility, and interdependency.
c. goal incompatibility, perceptual incongruity, and domain disagreement.
d. power, control, and domain disagreement.
e. power, interdependency, and perceptual incongruity.

 

 

ANS:  C                    PTS:   1                    REF:   p. 208             OBJ:   LO 5-3

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Knowledge

 

  1. _____ occurs when the retailer and supplier have different perceptions of reality.
a. Perceptual incongruity
b. Domain disagreements
c. Goal incompatibility
d. Gray marketing
e. Dual distribution

 

 

ANS:  A                    PTS:   1                    REF:   p. 208             OBJ:   LO 5-3

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Knowledge

 

  1. A customer visits Best Buy to learn about the different models, their features, and the usage of new digital cameras. This customer then leaves the store without purchasing the camera from Best Buy and makes the actual transaction on Amazon.com. This is an example of:
a. diverting.
b. gray marketing.
c. free-riding.
d. goal incompatibility.
e. perceptual incongruity.

 

 

ANS:  C                    PTS:   1                    REF:   p. 210             OBJ:   LO 5-3

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Application

 

  1. _____ occurs when achieving the goals of either the supplier or the retailer would hamper the performance of the other.
a. Perceptual incongruity
b. Domain disagreements
c. Goal incompatibility
d. Gray marketing
e. Dual Distribution

 

 

ANS:  C                    PTS:   1                    REF:   p. 208             OBJ:   LO 5-3

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Knowledge

 

  1. Prior to pulling its products out of Target, Tupperware made its products available in the giant retailer’s stores. Independent Tupperware sales representatives complained that this had a “detrimental effect” on Tupperware parties. This was an example of:
a. perceptual incongruity.
b. domain disagreements.
c. goal incompatibility.
d. gray marketing.
e. dual distribution.

 

 

ANS:  E                    PTS:   1                    REF:   p. 209             OBJ:   LO 5-3

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Application

 

  1. _____ occur when there is a disagreement about which member of the marketing channel should make decisions.
a. Perceptual incongruity
b. Domain disagreements
c. Goal incompatibility
d. Gray marketing
e. Dual distribution

 

 

ANS:  B                    PTS:   1                    REF:   p. 209             OBJ:   LO 5-3

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Knowledge

 

  1. The dominant behavior in successful supply chains is:
a. collaboration.
b. free-riding.
c. coercive power.
d. conflict resolution.
e. solidarity.

 

 

ANS:  A                    PTS:   1                    REF:   p. 210             OBJ:   LO 5-4

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Knowledge

 

  1. _____ occurs when the retailer trusts the supplier and the supplier trusts the retailer.
a. Solidarity
b. High dollar performance
c. Coercion
d. Mutual trust
e. Relationship marketing

 

 

ANS:  D                    PTS:   1                    REF:   p. 211             OBJ:   LO 5-4

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Knowledge

 

  1. _____ occurs when both retailer and supplier openly communicate their ideas, concerns, and plans.
a. Mutual trust
b. Two-way communication
c. Solidarity
d. Category management
e. Gray marketing

 

 

ANS:  B                    PTS:   1                    REF:   p. 211             OBJ:   LO 5-4

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Knowledge

 

  1. _____ exists when a high value is placed on the relationship between a supplier and retailer.
a. Mutual trust
b. Two-way communication
c. Solidarity
d. Category management
e. Gray marketing

 

 

ANS:  C                    PTS:   1                    REF:   p. 212             OBJ:   LO 5-4

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Knowledge

 

TRUE/FALSE

 

  1. A supply chain is a set of institutions that moves goods from the point of production to the point of consumption.

 

ANS:  T                    PTS:   1                    REF:   p. 184-185      OBJ:   LO 5-1

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Knowledge

 

  1. Profits sufficient for survival and growth would be difficult, if not impossible, to achieve if the retailer ignored the supply chain.

 

ANS:  T                    PTS:   1                    REF:   p. 185-186      OBJ:   LO 5-1

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Knowledge

 

  1. Once the retailer’s supply chain is developed, it should never be changed.

 

ANS:  F                    PTS:   1                    REF:   p. 186             OBJ:   LO 5-1

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Comprehension

 

  1. External forces affecting channels cannot be completely controlled by the retailer or any other institution in the supply chain, but they need to be taken into account when retailers make decisions.

 

ANS:  T                    PTS:   1                    REF:   p. 186             OBJ:   LO 5-1

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Knowledge

 

  1. Storing involves breaking down heterogeneous products into more homogenous groups.

 

ANS:  T                    PTS:   1                    REF:   p. 187             OBJ:   LO 5-1

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Knowledge

 

  1. The logistics network consists of all firms that are involved in moving physical inventory from initial source to the retail store.

 

ANS:  T                    PTS:   1                    REF:   p. 187             OBJ:   LO 5-1

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Comprehension

 

  1. The key difference between a primary and a facilitating marketing institution relates to whether the member takes title of goods.

 

ANS:  T                    PTS:   1                    REF:   p. 190             OBJ:   LO 5-1

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Comprehension

 

  1. Manufacturers and retailers, but not wholesalers, are primary marketing institutions.

 

ANS:  F                    PTS:   1                    REF:   p. 190             OBJ:   LO 5-1

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Knowledge

 

  1. Agents and brokers are two types of primary channel institutions.

 

ANS:  F                    PTS:   1                    REF:   p. 190             OBJ:   LO 5-1

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Comprehension

 

  1. While they never actually take title to the goods, most agents and brokers take physical possession of the merchandise.

 

ANS:  F                    PTS:   1                    REF:   p. 192             OBJ:   LO 5-1

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Comprehension

 

  1. Faster delivery enables the supply chain to have lower warehousing costs.

 

ANS:  T                    PTS:   1                    REF:   p. 194             OBJ:   LO 5-1

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Knowledge

 

  1. A public warehouse is a facility that stores goods for safekeeping for any owner in return for a fee, usually based upon the dollar value of merchandise stored.

 

ANS:  T                    PTS:   1                    REF:   p. 194             OBJ:   LO 5-1

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Knowledge

 

  1. Public warehouses, trucking companies, and banks are examples of facilitating institutions.

 

ANS:  T                    PTS:   1                    REF:   p. 194-195      OBJ:   LO 5-1

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Comprehension

 

  1. Insurance firms can make it possible for retailers to have what would be otherwise risky promotions.

 

ANS:  T                    PTS:   1                    REF:   p. 195             OBJ:   LO 5-1

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Knowledge

 

  1. Venture-capital firms are primarily used by retailers starting a new operation or format.

 

ANS:  T                    PTS:   1                    REF:   p. 195             OBJ:   LO 5-1

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Knowledge

 

  1. An indirect supply chain is a channel that results when independent channel members are added between the manufacturer and consumer.

 

ANS:  T                    PTS:   1                    REF:   p. 196             OBJ:   LO 5-2

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Knowledge

 

  1. As a general rule, intensive distribution is associated with shopping goods.

 

ANS:  F                    PTS:   1                    REF:   p. 197             OBJ:   LO 5-2

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Comprehension

 

  1. As a general rule, selective distribution is associated with convenience goods.

 

ANS:  F                    PTS:   1                    REF:   p. 197             OBJ:   LO 5-2

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Comprehension

 

  1. As a general rule, exclusive distribution is associated with specialty goods.

 

ANS:  T                    PTS:   1                    REF:   p. 197             OBJ:   LO 5-2

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Comprehension

 

  1. The goal of every channel member should be to “minimize the suboptimization” of the supply chain.

 

ANS:  T                    PTS:   1                    REF:   p. 198             OBJ:   LO 5-2

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Comprehension

 

  1. In a conventional marketing channel, every member seeks to maximize its own performance, and has little or no concern for the overall performance of the total supply chain.

 

ANS:  T                    PTS:   1                    REF:   p. 198             OBJ:   LO 5-2

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Comprehension

 

  1. There are three types of vertical marketing channels: corporate, contractual, and administered.

 

ANS:  T                    PTS:   1                    REF:   p. 198             OBJ:   LO 5-2

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Comprehension

 

  1. It is common for wholesaler-sponsored voluntary groups to offer the retailer both store site and location analysis as well as assistance in designing the store layout.

 

ANS:  T                    PTS:   1                    REF:   p. 200             OBJ:   LO 5-2

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Comprehension

 

  1. A franchise is a form of a vertical marketing channel.

 

ANS:  T                    PTS:   1                    REF:   p. 202             OBJ:   LO 5-2

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Comprehension

 

  1. One advantage of franchising is that the owner of a franchise must give up some freedom in making business decisions that the owner of a nonfranchised business would normally be allowed to make.

 

ANS:  F                    PTS:   1                    REF:   p. 203             OBJ:   LO 5-2

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Comprehension

 

  1. One disadvantage that a franchisor provides a franchisee is that by borrowing from the franchisor, the franchisee has access to a lower cost of capital.

 

ANS:  F                    PTS:   1                    REF:   p. 203             OBJ:   LO 5-2

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Comprehension

 

  1. Most franchisors normally provide financial assistance to existing franchisees.

 

ANS:  F                    PTS:   1                    REF:   p. 204             OBJ:   LO 5-2

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Comprehension

 

  1. Administered vertical marketing channels exist when one member of the channel takes the initiative to lead the channel by applying the principles of effective interorganizational management.

 

ANS:  T                    PTS:   1                    REF:   p. 204             OBJ:   LO 5-2

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Knowledge

 

  1. Retailers that are not part of a contractual channel or corporate channel will probably participate in different channels since they will need to acquire merchandise from many suppliers.

 

ANS:  T                    PTS:   1                    REF:   p. 206             OBJ:   LO 5-3

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Comprehension

 

  1. Interdependency is the major cause of the conflict found in supply chains.

 

ANS:  T                    PTS:   1                    REF:   p. 206             OBJ:   LO 5-3

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Knowledge

 

  1. Power is the ability of one channel member to influence the decisions of the other channel members.

 

ANS:  T                    PTS:   1                    REF:   p. 206             OBJ:   LO 5-3

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Knowledge

 

  1. The more dependent the supplier is on the retailer, the less power the retailer has over the supplier.

 

ANS:  F                    PTS:   1                    REF:   p. 206             OBJ:   LO 5-3

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Comprehension

 

  1. When a manufacturer provides a retailer with a bonus if they exceed their expected sales of the manufacturer’s products, the manufacturer is using its reward power.

 

ANS:  T                    PTS:   1                    REF:   p. 207             OBJ:   LO 5-3

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Application

 

  1. Auto dealers that want to handle BMW’s because of the cars’ status is an example of expertise power.

 

ANS:  F                    PTS:   1                    REF:   p. 207             OBJ:   LO 5-3

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Application

 

  1. Only three sources of power (i.e., reward, coercive, and expertise) should be used in any channel relationship.

 

ANS:  F                    PTS:   1                    REF:   p. 207             OBJ:   LO 5-3

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Comprehension

 

  1. The use of legitimate and coercive power tends to elicit conflict and destroy cooperation.

 

ANS:  T                    PTS:   1                    REF:   p. 207             OBJ:   LO 5-3

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Comprehension

 

  1. Even if the channel is well-managed, there will always be some conflict between the channel members.

 

ANS:  T                    PTS:   1                    REF:   p. 208             OBJ:   LO 5-3

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Comprehension

 

  1. Most channels operate without conflict.

 

ANS:  F                    PTS:   1                    REF:   p. 208             OBJ:   LO 5-3

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Comprehension

 

  1. The three major sources of conflict between retailers and their suppliers are: perceptual incongruity, goal incompatibility and domain disagreements.

 

ANS:  T                    PTS:   1                    REF:   p. 208             OBJ:   LO 5-3

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Knowledge

 

  1. Perceptual incongruity occurs when achieving the goals of either the supplier or the retailer would hamper the performance of the other.

 

ANS:  F                    PTS:   1                    REF:   p. 208             OBJ:   LO 5-3

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Comprehension

 

  1. Dual distribution occurs when a manufacturer sells to independent retailers and also through its own retail outlets.

 

ANS:  T                    PTS:   1                    REF:   p. 208             OBJ:   LO 5-3

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Knowledge

 

  1. Domain disagreements occur when there is disagreement about which member of the marketing channel should lead the channel and make the decisions.

 

ANS:  T                    PTS:   1                    REF:   p. 209             OBJ:   LO 5-3

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Knowledge

 

  1. Gray marketing is when counterfeit merchandise flows through unauthorized channels.

 

ANS:  F                    PTS:   1                    REF:   p. 209             OBJ:   LO 5-3

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Comprehension

 

  1. Conflict is not always negative; at times, conflict can have the benefit of reminding channel members of their interdependency on each other and may actually increase channel performance.

 

ANS:  T                    PTS:   1                    REF:   p. 210             OBJ:   LO 5-3

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Application

 

  1. A retailer should abandon a supply chain partner at the first sign of trouble.

 

ANS:  F                    PTS:   1                    REF:   p. 210             OBJ:   LO 5-4

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Comprehension

 

  1. Channel members must work together with their partners to offer products at appropriate prices. No one will win if either partner is not honest and fair with the other or with the retail customer.

 

ANS:  T                    PTS:   1                    REF:   p. 210             OBJ:   LO 5-4

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Knowledge

 

  1. By limiting the number of partners for each merchandise line, one can signal greater commitment and trust to partners, thus building stronger relationships.

 

ANS:  T                    PTS:   1                    REF:   p. 210             OBJ:   LO 5-4

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Comprehension

 

  1. The management of cooperative relations is facilitated by mutual trust, two-way communication, and solidarity.

 

ANS:  T                    PTS:   1                    REF:   p. 211             OBJ:   LO 5-4

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Comprehension

 

  1. Mutual trust occurs when both the retailer and its supplier have faith that each will be truthful and fair in their dealings with each other.

 

ANS:  T                    PTS:   1                    REF:   p. 211             OBJ:   LO 5-4

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Knowledge

 

  1. Two-way communication is a pathway for resolving disputes which allows the channel relationship to continue.

 

ANS:  T                    PTS:   1                    REF:   p. 211             OBJ:   LO 5-4

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Comprehension

 

  1. Because of the interdependency between the retailer and supplier, two-way communication becomes necessary to coordinate actions.

 

ANS:  T                    PTS:   1                    REF:   p. 211             OBJ:   LO 5-4

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Comprehension

 

  1. Solidarity in a channel exists when a high value is placed on the relationship between a supplier and retailer.

 

ANS:  T                    PTS:   1                    REF:   p. 212             OBJ:   LO 5-4

STA:   MBA: Operations skills                   LOC:  MBA: Operations skills

KEY:  Bloom’s: Knowledge

 

ESSAY

 

  1. Consider the retailer’s role as a member of a larger supply chain. Why should the retailer view itself as part of this larger channel?

 

ANS:

In reality, it is the retailer’s supply chain, rather than its outlet, that competes against other retailers. If the retailer ignores the supply chain in order to maximize short-run profits, then in the long run the chain will work against the retailer. If the supply chain overlooks the retailer, then profits sufficient for survival and growth will vanish. All channels are affected by five external forces: (1) consumer behavior, (2) competitor behavior, (3) the socioeconomic environment, (4) the technological environment, and (5) the legal and ethical environment. These forces cannot be completely controlled by the retailer or any other institution in the supply chain, but they need to be taken into account when retailers make decisions. Supply-chain or channel structure also depends on the number of tasks or functions each member is willing to perform. Eight marketing functions must be performed by any supply chain or channel: buying, selling, storing, transporting, sorting, financing, information gathering, and risk taking. They cannot be eliminated; however they can be shifted or divided in differing ways among the different institutions and the consumer in the supply chain. All forms of retailing were created by rearranging the marketing functions among institutions and consumers. No member of the channel would want or be able to perform all eight marketing functions entirely. For this reason, the retailer must view itself as being dependent on other supply-chain members.

 

PTS:   1                    REF:   p. 182-190     OBJ:   LO 5-1           STA:   MBA: Operations skills

LOC:  MBA: Operations skills                   KEY:  Bloom’s: Evaluation

 

  1. Should facilitating institutions be eliminated from the supply chain? Why or why not?

 

ANS:

The institutions involved in performing the eight marketing functions are usually broken into two categories: primary and facilitating. Facilitating marketing institutions are those that do not actually take title but assist in the marketing process by specializing in the performance of certain functions. Many institutions facilitate the performance of the marketing functions. Institutions that facilitate the buying and selling functions in the supply chain include agents and brokers. Marketing communications agencies facilitate the selling process by designing effective advertisements and advising management on where and when to place these advertisements. Institutions that facilitate the transportation function are motor, rail, and air carriers and pipeline and shipping companies. The major facilitating institution involved in storage is the public warehouse, which stores goods for safekeeping in return for a fee. A variety of facilitating institutions also help provide information throughout the supply chain. The role of computer specialists, referred to as channel integrators, in setting up computer channels for transmitting information is evident throughout the business world. Other facilitating institutions aid in financing, such as commercial banks, merchant banks, factors, stock and commodity exchanges, and venture-capital firms. Insurance firms can assume some of the risks in the channel, insuring inventories, buildings, trucks, equipment and fixtures, and other assets for the retailer and other primary marketing institutions.

 

PTS:   1                    REF:   p. 192-195     OBJ:   LO 5-1           STA:   MBA: Operations skills

LOC:  MBA: Operations skills                   KEY:  Bloom’s: Evaluation

 

  1. Explain how channel length and channel width can be strategically used by a retailer to position its offering in the marketplace.

 

ANS:

Supply-Chain Length: Retailers do not always have a lot of control over their channel length and must learn to operate as efficiently as possible within an inefficient channel. The desired length is determined by many customer-based factors such as the size of the customer base, geographical dispersion, behavior patterns like purchase frequency and average purchase size, and the particular needs of customers. In many cases, indirect channels are actually cheaper in terms of total costs involved. The retailer could thus position itself as an economy store exploiting the cost advantage in an indirect channel.

 

Supply-Chain Width: Intensive distribution means that all possible retailers are used to reach the target market. Although there are many exceptions, as a rule, intensive distribution is associated with the distribution of convenience goods. Selective distribution means that a smaller number of retailers are used. Selective distribution is associated with shopping goods. Exclusive distribution means only one retailer is used in the trading area. Exclusive distribution is identified with specialty goods.

 

PTS:   1                    REF:   p. 195-197     OBJ:   LO 5-2           STA:   MBA: Operations skills

LOC:  MBA: Operations skills                   KEY:  Bloom’s: Analysis

 

  1. Explain the key differences between a conventional marketing channel and a vertical marketing system.

 

ANS:

A conventional marketing channel is one in which each member of the supply chain is loosely aligned with the others and takes a short-term orientation. Each member’s orientation is toward the subsequent institution in the channel. All the members of the channel focus on their immediate desire to close the sale or create a transaction. Thus, the conventional marketing channel consists of a series of pairs in which the members of each pair recognize each other but not necessarily the other components of the supply chain. The conventional marketing channel is a sloppy and inefficient method of conducting business. It fosters intense negotiations within each pair of institutions in the supply chain. In addition, members are unable to see the possibility of shifting or dividing the marketing functions among all the participants. It is an unproductive method for marketing goods.

Vertical marketing channels are capital-intensive networks of several levels that are professionally managed and rely on centrally programmed systems to realize the technological, managerial, and promotional economies of long-term relationships. The basic premise of working as a system is to operate as close as possible to the 100-percent efficiency level. This is achieved by eliminating the suboptimization that exists in conventional channels and improving the channel’s performance by working together. Formerly adversarial relationships between retailers and their suppliers are now giving way to new vertical channel partnerships that minimize such inefficiencies. Quick response (QR) systems or efficient consumer response (ECR) systems, which are identical despite the differing names adopted by various retail industries, are designed to obtain real-time information on consumers’ actions by capturing stockkeeping unit (SKU) data at point-of-purchase terminals and then transmitting that information through the entire supply chain. This information is used to develop new or modified products, manage channelwide inventory levels, and lower total channel costs. There are three types of vertical marketing channels: corporate, contractual, and administered.

 

PTS:   1                    REF:   p. 198-199     OBJ:   LO 5-2           STA:   MBA: Operations skills

LOC:  MBA: Operations skills                   KEY:  Bloom’s: Synthesis

 

  1. Discuss the three types of behaviors and attitudes that facilitate relations to resolve conflict that inevitably occur in every retail supply chain. Why is collaboration important in channel relations?

 

ANS:

Collaboration is necessary and beneficial because of the interdependency of retailers and suppliers. Retailers and suppliers must develop a partnership if they want to deal with each other on a long-term and continuing basis. Collaboration in channel relations is facilitated by three important types of behavior and attitude. This is the only way to perform marketing functions effectively and efficiently for the benefit of the customer. These are mutual trust, two-way communication, and solidarity.

  • Mutual Trust: Mutual trust occurs when the retailer trusts the supplier, and the supplier trusts the retailer. In continuing relations between retailers and suppliers, mutual trust, which is built on past and present performance between members, is critical. If mutual trust is present, both parties will tolerate inequities because they know in the long term they will be fairly treated. When trust exists, it is contagious and allows the channel to grow and prosper. This occurs because of reciprocity. If a retailer trusts a supplier to do the right thing and the supplier treats the retailer fairly, then the retailer develops more trust and the process of mutual trust continues to build.
  • Two-Way Communication: Conflict is inevitable in retail supply chains. Consequently, two-way communication becomes the pathway for resolving disputes and allowing the channel relationship to continue. Two-way communication occurs when both parties openly communicate their ideas, concerns, and plans. Because of the interdependency of the retailer and supplier, two-way communication is necessary to coordinate actions. Disputes can be resolved by good two-way communication, and this improves trust. Furthermore, trust facilitates open two-way communication. The process is circular and builds over time.
  • Solidarity: Solidarity exists when a high value is placed on the relationship between a supplier and a retailer. As trust and two-way communication increase, a higher degree of solidarity develops. Solidarity results in flexible dealings where adaptations are made as circumstances change. When solidarity exists, each party will come to the rescue of the other in times of trouble.

Category management, where an entire category is managed as a unit, is one of the ways collaboration is used in supply chains today. This involves the simultaneous management of price, promotional efforts and other elements within the category based ob the firm’s goals, the changing environment and consumer behavior.

 

PTS:   1                    REF:   p. 211-214     OBJ:   LO 5-4           STA:   MBA: Operations skills

LOC:  MBA: Operations skills                   KEY:  Bloom’s: Evaluation

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